Papel reciclado 114

Long-term abnormal returns were computed as long-term buy-and-hold abnormal returns of sample firms less the long-term buy-and-hold abnormal returns of a reference portfolio (refer to section 5.5.3 and Appendix D for details). Table 7.1 presents the results of the size and, size and book-to-market value of equity-adjusted BHAR where the benchmark contemporaneous return is that of a portfolio of stocks with the book-to-market value ratio and size close to those of the sample firms. The results support the behavioural theory which posits that bidder firms lose value in the long-term because of either managerial hubris or personal utility maximisation where markets are efficient. The results are consistent with prior studies from developed and other developing markets but inconsistent with previous studies on China15. The result supports this study hypothesis that in the long-term bidder firms lose value as the market adjust to the actual performance of the resultant firm. The result is a reversal of the gains recorded in the short-term (see Table 6.2). This may suggest the markets overreact to the M&A announcement as they incorporate the information into share prices in the short-term and then adjust the share price as they incorporate actual performance in the long-term (S. Chen, Liu, & Chen, 2014). The investors may display excessive optimism about the potential synergetic gains from M&A deal but revise their judgements based on ‘new’ information about the acquisition. The negative abnormal returns may also be due to the bidders firm having problems integrating the acquired target thereby incurring more integration costs than synergistic gains after

15 _{Prior studies that report positive and significant returns: Boateng and Bi (2013); Chi et al., (2011); Zhou et}

150 M&A announcement (S. P. Lee & Isa, 2012). These results confirm hypothesis H1.2 that abnormal returns following M&A are negative and significant in the long-term.

Since the 24-month size and market-to-book value adjusted returns event window reports statistically significant BHAR and has been used in prior studies (see Appendix D), the analysis for this study will be based on this event window for the long-term results discussion. We also find that in the sample of 1,455 domestic M&A, the number of acquisitions that experienced negative returns (63.92%) outnumbered those that created shareholder wealth (36.08%). The mean size and market-to-book value adjusted buy-and- hold abnormal returns (SMTBVBHAR [+1, +24]) across all the acquisitions in the sample was –0.249 (p<0.001) suggesting that M&A do not enhance bidder firms’ shareholder value in the long-term.

Table 7.1: Long-term bidder returns using buy-and-hold abnormal returns

The table reports the long-term bidder returns and statistical distribution. The two-year post-acquisition period is from 1 to 24 months after announcement. For definitions of the different benchmark models for estimating BHARs and on the construction of the size and book-to-market value benchmark portfolio, see text. The statistical significance is based on bootstrapped critical values.

Buy-and-hold abnormal returns (BHAR) No of

Obs. Mean

Standard

Deviation Q1 Median Q3 p-value

Size-adjusted BHAR

SBHAR [+1, +12] 1455 -0.146 1.458 -0.448 0.003 0.336 0.000 SBHAR [+1, +24] 1455 -0.358 2.829 -0.668 0.007 0.512 0.000 SBHAR [+1, +36] 1455 -0.718 4.301 -1.092 0.013 0.727 0.000

Size and MTBV-adjusted BHAR

SMTBVBHAR [+1, +12] 1455 -0.097 0.605 -0.292 -0.089 0.118 0.000 SMTBVBHAR [+1, +24] 1455 -0.249 1.249 -0.510 -0.163 0.163 0.000 SMTBVBHAR [+1, +36] 1455 -0.386 1.658 -0.805 -0.281 0.166 0.000

The results also show that there is a large variation in the distribution of abnormal returns among the bidder firms. Size and market-to-book value adjusted bidder returns for the event window [+1, +24] vary in the interval -0.510 and 0.163. Although the BHAR inter-quartile range is large (0.673), most of the returns are concentrated around the mean (-0.249) over 24-month event window with a standard deviation of 1.249. This indicates that there is a large amount of M&A performing similarly.

7.2.1.1Long-term bidder returns analysis by year of announcement

Table 7.2 presents the 24-month SMTBVBHAR over the sample period. The table shows that throughout the sample period bidders obtain negative and significant returns at 10%

151 level or better except for 2008, 2010 and 2011 which report insignificant returns. The table also shows that abnormal losses after 2007 are lower than the period before. This may be attributed to the effects of the share reforms. These reforms were introduced in 2005 and continue up to the present date. As the pre-reform period was one dominated by non- tradable shares and the post-reform period is one of the tradable shares, it is necessary to ascertain that abnormal returns were affected by market liquidity. This may also suggest an improvement in the efficiency of China markets as they move towards a market economy and therefore reporting comparable results to the US and the UK acquisitions.

Table 7.2: Long-term bidder returns analysis by year of announcement

The table reports the long-term bidder returns by year of announcement. The two-year post-acquisition period is from 1 to 24 months after announcement. For definitions of the different benchmark models for estimating BHARs and on the construction of the size and book-to-market value benchmark portfolio, see text. The statistical significance is based on bootstrapped critical values.

No of Obs. % of sample SMTBVBHAR [+1, +24] p-value 2002 80 5.50 -0.183 0.001 2003 117 8.04 -0.084 0.019 2004 122 8.38 -0.211 0.006 2005 102 7.01 -2.021 0.000 2006 106 7.29 -0.312 0.087 2007 182 12.51 -0.143 0.001 2008 177 12.16 -0.109 0.112 2009 184 12.65 -0.107 0.045 2010 196 13.47 -0.025 0.345 2011 189 12.99 -0.016 0.639 Total 1455 100.00 -0.249 0.000